Mar 21, 10
Read in March, 2010
This book will make you very, very angry, if you've got a live neuron left in your brain.
If I could, I would buy a copy of this for every American citizen, AND make them read it. Maybe, then, everyone would be angry enough to send mobs after the surprisingly few people who created our current economic crisis, and hang them in public - and you'll be convinced they well deserve this, after you read this book.
I did not think it was possible for me to feel more anger about the months of February through October 2007, or to feel more anger than I did as I listened to George Bush explain why he "had" to create the TARP program to bail out AIG and others, that Wall Street "got a little drunk." I was wrong. AIG and every major investment bank should have been allowed to fail and, whatever pain we might have felt in the 2.5 years since, we would be better off in the long run.
But I'm writing a book review, about a book this is utterly brilliant and too incredible to put down. Perhaps most importantly, Michael Lewis clearly explains the "trading instruments" (credit default swaps and CDOs) that were supposedly "too complex" for anyone but mathematicians to understand. It turns out that's not at all true; they're not that complex after all. In the most damning way, Lewis shows how it was not complexity but hubris and stupidity that created these instruments, and how they created systemic risk.
One of many examples of "hubris and stupidity" is the fact that almost no one (except my hero, a one-eyed man with Asperger's in Cupertino, CA) actually read the loan prospectuses: not traders, not the investment banks that employed the traders, and not the ratings agencies (Moody's and S&P). For this alone, Moody's and S&P should be shut down and, barring that, disregarded forever. The information on precisely how bad subprime loans were was all there, from the beginning; it's just that no one bothered to read it.
Well - almost no one. A handful of people in California did (literally, five) and a few others, and that's the other part of what makes this tale so painful: They tried to warn people. They went to every investment bank, they went to Moody's, they went to the SEC, and no one would listen to them. So, anytime you hear anyone from those organizations say they didn't know, that they couldn't have known, you'll also know they're lying.
In short: This book is the most important, lucid book about the financial crisis written to date. It's damning, it's exciting, it's painful, crazy, and heartbreaking. I only wish it were a work of fiction.